January 7, 1999
Cisco Plans Campaign to Push
Internet Products for Home Use
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
Cisco Systems Inc. is mounting a new campaign to draw attention to its
consumer business, emphasizing new Internet-related products that can be
used in the home.
The San Jose, Calif., maker of computer-networking gear is using this
week's Consumer Electronics Show in Las Vegas to highlight a new
cable-modem device, as well as an expansion of its longstanding
relationship with AT&T Corp. to help develop a national cable-modem
network.
Most of Cisco's past success has come from
selling expensive computer-networking
equipment to big companies. But with the
growth of the Internet, providing high-speed data links to the home has
become an important new marketplace, and Cisco, like most of its
competitors, is developing a consumer-oriented line of products.
Cisco won't be entering the home market directly; instead, it will license its
technology to other manufacturers, such as Sony Corp. of Japan.
Cisco said it doesn't plan on showing a big profit on the generally low-cost
devices it will be providing for the home. Instead, it sees the products as a
way to create more demand for high-margin equipment such as routers
and switches that it sells to telecommunications companies.
Even so, Cisco will face stiff competition in the home from existing
suppliers to that market, notably 3Com Corp., which has an extensive
retailing network owing to the popularity of its personal-computer
modems. 3Com, based in Santa Clara, Calif., is making a big consumer
push of its own. "The home is our turf," said Rick Edson, a 3Com vice
president.
Cisco also will announce this week that it has been selected to be a key
supplier to AT&T as that company builds a national cable modem network
using the infrastructure it has agreed to buy from Tele-Communications
Inc.
The AT&T deal isn't an exclusive one, and a Cisco spokesman put its
value at less than $100 million, a medium-size pact by Cisco standards.
Cisco already has extensive ties with AT&T, supplying hundreds of
millions of dollars in equipment a year to other parts of the company.
Cisco's new cable modem device will allow home users to plug a
telephone directly into the Internet. Vern Mackall, an analyst at
International Data Corp. in New York, said the product was comparable
to other devices expected to soon be widely available as more homes get
hooked up to cable modems.
Currently, only about half a million homes have high-speed cable modem
access. But the simple availability of new cable modems won't mean a big
jump in that number, said Mr. Mackall. That's because cable companies
first must spend billions of dollars upgrading their cable systems before
they are ready to make use of the products sold by Cisco and the other
networking companies.
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